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Posted On: 21 January 2014 01:56 pm
Updated On: 12 November 2020 02:13 pm

Qatar identifies issues relevant to LNG supply

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Qatar has presented the government with the issues relevant to the LNG (liquefied natural gas) in a nonbinding document, heads of agreement (HoA).

Among other things, it has sought a LNG supply contract for a period of 15 years extendable for another five years with no price reopener. The country wants a penalty of $200 million for termination of the agreement at any stage, reveals a copy of the HoA made available with The News. The agreement further wants the price to be fixed as a percentage of Brent, it shows.

According to the document, Qatargas Liquefied Gas Company Limited will make an agreement for LNG supply with Pakistan State Oil.The officials who attended the meeting that examined the HoA confirmed that the contract would be executed between the two said firms.

The top officials of stakeholders in Pakistan, Sui Southern, Inter State Gas Systems, Pakistan State Oil and ministry of petroleum and natural resources have discussed the said document.

Notably, ownership of Qatar Liquefied Gas Company Ltd is unclear as it appears to be a privately-held company. Statements to the effect that the Qatar Government has instructed the firm to enter into negotiations clearly point to the private nature of the company.

Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi told the scribe that HoA were received and being examined by the concerned departments. Officials at petroleum ministry considered the contract extremely one-sided in case of penalty on nonperformance or non-delivery by the LNG supplier.

The penalty is only 10 percent of the value of LNG, while in the draft agreement in the previous tender, it was 100 percent, they said.LNG prices are forecast, they argued, to be delinked from Brent within the next three to five years and due to the glut of gas in the U.S and the anticipated fall in price worldwide, agreeing to a fixed Brent rate for 15 years is tantamount to mortgaging Pakistan’s future generation.

The officials said that the government was committing a sovereign guarantee to cover the obligation under the agreement. This is against the LNG policy, they added.

Besides, though the HoA reads the contract of the tolling facility has been awarded to Elengy (Pvt) Ltd, yet the officials denied this, saying this is not the case as per the current government’s position. The officials said a term that

“There is no provision for on sale or diversion of any LNG Cargo, which cannot be unloaded by Pakistan for any reason,” the document unveils. “This is very restrictive and bound to impact Pakistan’s position negatively,” they said.